Abstract：Nigerians frequently lament the depreciation of the Naira, blaming it on irrational individuals out to harm the economy for their own gain. Because of the actions of rogue rent-seekers, the average Nigerian sees the currency's value diminishing day by day as a means of commerce, a store of value, and a measure of postponed payment.
Nigerians frequently lament the depreciation of the Naira, blaming it on irrational individuals out to harm the economy for their own gain. Because of the actions of rogue rent-seekers, the average Nigerian sees the currency's value diminishing day by day as a means of commerce, a store of value, and a measure of postponed payment.
For failing to “defend” the currency, the leadership of the Central Bank of Nigeria (CBN) is also somewhat to blame. The CBN should muster the strength to refute such critics and figure out practical solutions to strengthen and maintain the naira. However, doing so is akin to searching for a needle in a haystack.
The naira has lost 125.4 percent of its value over the past seven years, falling from an official rate of N197 per US dollar in 2015 to N444 per US dollar in 2022. Similar to the stock market, the parallel market fell 227.7% from N235/US$1 in 2015 to the current N770/US$1 after reaching N950/US$1 a few weeks ago. Nigerians continue to live in a nightmare, which affects every aspect of our daily lives.
There is no need to speculate about what has occurred during the past seven years. It is directly related to the economy's low productivity. The National Bureau of Statistics (NBS) reports that GDP will grow by 2.25 percent in the third quarter of 2022, making it clear that the economy is drastically underperforming. As the official unemployment rate is 33 percent, the Naira's sharp depreciation is reflected in the high inflationary trend, which reached 21.1 percent in October 2022.
The growing Dutch has cast a looming doom on crude oil, which provides for 90% of the country's foreign exchange earnings and 85% of its budget funding, is a more worrisome aspect. The government is embarking on endless borrowing to the tune of N42.84 trillion as of the first half of 2022 because of the widespread oil theft, which has depleted the earnings from that source and exacerbated the nation's economic challenge. Our debt service to revenue is now equal to 100%. The country's refineries have been idle for many years since we import gasoline to suit our domestic needs and spend a lot of money on subsidies.
The CBN invests a lot of money to protect the naira. However, if the economy is not producing and exporting enough to generate enough foreign currency, then the fight to protect the Naira against foreign currencies will be in vain. This is what strengthens the currency and draws in investment.
There have been conversations about increasing our foreign reserves and luring in outside capital. It is still necessary to create an atmosphere that encourages both local and foreign investment in the economy. This is essential because, in the absence of local investment, the ordinary international investor is unlikely to choose the local market. This newspaper urges the quick implementation of current domestic productivity-boosting programs.
Nigeria has launched several export promotions campaigns, which have the added benefit of creating jobs and increasing income. The CBN RT200 FX scheme is one of these measures, to help output in order to increase non-oil currency profits. Along with the PAVE (produce, add value, and export) policy of the central bank, this should be aggressively pushed.
Financial losses are part of the investment markets, and investors are typically willing to accept some degree of market risk.
The Centre for the Promotion of Private Enterprise (CPPE), in the organized private sector, has reiterated the FX market by combining the various rates and making sure the rates are driven by the market. This recommendation follows the sustained depreciation of the naira throughout the year 2022. In an interview with the New Telegraph in Lagos by Dr. Muda Yusuf, the Director and Chief Executive Officer of CPPE. According to him, the official rate had risen to N461/$ and the parallel/BDC rate reached N750/$.
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